REA Group Limited (ASX: REA), Carsales.Com Ltd (ASX: CAR) and SEEK Limited (ASX: SEK) have dominated their industries in similar ways. Each took advantage of the transition from print to online media in Australia, grew the most popular portal in their respective market (property, cars, and jobs), and then exploited the network effect to grow their business.
Over the last five years they have all blitzed the market, with average annual returns of 37%, 23% and 19%. If you have been watching from the sidelines, you may feel like the best days are over and you have missed out. But with all three companies expanding overseas, there may be many more years of growth to come.
REA Group
REA Group earns 90% of its revenue from its Australian operations, but has investments in five European property portals (casa.it, atHome.lu, atOffice.lu, atHome.de and immoRegion.fr), the Chinese property site myfun.com, and a 20% share of the second-largest property portal in the United States (Realtor.com).
REA Group is also finalising its acquisition of iProperty Group Ltd (ASX: IPP), which holds a portfolio of property websites across Hong Kong, Thailand, Malaysia, Indonesia and Singapore.
After bouncing from a 52-week low near $37 it is now trading around $53, not far from its record high.
With a P/E ratio of 33, REA Group is not cheap relative to the broader market, but for a strong growth company this may be justified. Personally, I would look for a price below $50 before investing.
Carsales
Carsales dominates online advertising for automotive listings in Australia and is slowly building a global portfolio of similar websites. Foreign investments are currently only a minor contribution to revenue, however its interests in Mexico, Brazil, and South Korea look promising. It also has a 20% stake in iCar Asia Ltd (ASX: ICQ) which is targeting the emerging markets of Malaysia, Indonesia and Thailand.
After a low of $9.30 last year shares have since recovered to $11.80. This is close to an all-time high, but still represents reasonable value based on its high level of growth and a P/E ratio of 27.
SEEK Limited
Of the three, SEEK is the furthest along the path to international expansion, with 60% of revenue coming from foreign investments in India, China, and throughout Latin America, South East Asia, and Africa.
The share price has been volatile in the last year, trading as low as $11.40 and as high as $18.99.
Currently sitting at around $14 with a P/E ratio of 18 and good prospects for continued international growth, I think SEEK represents good value for long-term investors.
Foolish takeaway
REA Group, Carsales.Com and SEEK are strong companies with prospects for continued growth through offshore expansion. There is a good case for each as core holdings in a diversified stock portfolio.
